Perceived Barriers in The Adoption & Usage of Credit Cards

Perceived Barriers in the Adoption & Usage of Credit Cards
Perceived Barriers in the

Adoption & Usage of
Credit Cards
Researchers Roll #
Hasnain Akhtar 217

M. Ayaz Amjad 225
M. Fahad Butt 226
Madiha Irshad 228
Nain Tara 240
Department of Management Sciences 1

Declaration
We declare that no part of this research paper has been taken from existing
published or unpublished materials without due acknowledgement and attrition,
and that all secondary material contained therein has been fully and
appropriately referenced to the best of our ability.
Signed _______________
Dated: 12th April 2010

Acknowledgments
We would like to thank Almighty Allah, for blessing us intellect that has helped us
completing this complex task.
We would like to thank our supervisor Mr. Abdul Mannan Khan for his guidance,
encouragement, tremendous help and support throughout our research. We
would like to thank the staff members of banks that include Habib Bank Limited,
Bank Alfalah Limited and United Bank Limited for clarifying our understanding
about basic concepts in credit cards.
We would like to thank our parents for sponsoring us and other family members
& friends for their love and support.

Abstract understanding of factors or variables

influencing the plastic money market
negatively in Pakistan. Thus it is useful
Purpose: - The purpose of this research
in designing marketing strategies for
is to present an exploratory research
card-issuers for better growth of this
into the current users and non-users of
payment mechanism. The sample was
credit cards. The aim is to identify the
drawn from the narrower base than the
different factors that cause low adoption
actual target population of the Pakistan
and usage rate among the Pakistani
market.
population. It then aims to discuss
barriers that are acting in the stumpy
Practical implications: - Hitherto there
growth of a potential credit card market.
has been a very limited (almost zero)
amount of research into payment cards
Design/Methodology: - A survey was
in Pakistan and yet with the market for
conducted, statistical test were used to
financial services opening up in
identify the intensity of each of the
Pakistan, this research is timely both for
factor, identified through previous
domestic banks wishing to issue credit
literature. A sample consisting of both
cards and for foreign entrants, seeking
cardholders and non-cardholders was
to enter the Pakistani market via their
utilized to gauge the differences
expertise in credit cards.
amongst the perception about credit
cards in both the segments. Than
Originality/Value: - Despite the
statistical analysis tool t-test was
importance of consumer credit, virtually
employed to determine the associations
no literature or research exists on
between the results of cardholders and
identifying the barriers in the adoption &
non-cardholders.
use of credit cards in Pakistan. So this
paper intends to close this gap. Further,
Findings: - The adoption & usage of
by combining the demographics, costs
credit cards was found to be significantly
incurred with the respondents’
influenced by demographic factors as
perceptions concerning credit card
well as perceptions that include “credit
ownership and use, our study offers a
card leads to overspending”,
richer analysis to explain consumer
“unreasonable interest rates”, “and lack
behavior than previous literatures.
of information”, “low acceptability”.
Certain variables create bigger
barricade for the users like additional
Key words: credit card, barriers,
charges, high interest rates, insufficient
credit limits etc. Pakistan,
Research Limitations/Implications: - Paper Type: Research paper

This research provides an in-depth

TABLE OF CONTENTS
TABLE OF CONTENTS....................................................................................................5

and have success on the horizon of

Introduction Pakistan's credit card business. The
plastic money industry in Pakistan is
The liberalization of the monetary one of the undeveloped ones. At this
sectors in Asia has resulted in the rapid time, there are a few people which are
propagation of credit card companies using them or even are aware of its
and financial companies providing other services. The majority of people does
types of consumer credit. “In modern not consider it fruitful and part their ways
commerce, credit cards (along with debit from it.
cards) serve as a payment device in lieu
of cash or checks for millions of routine It may be pointed out that the misuse of
purchases as well as for many debit/credit cards has opened new
transactions that would otherwise be chapters of fraud and forgery. In most of
inconvenient, or perhaps impossible”. the cases, the misuse of cardholders’
(1970-2000; Durkin, Thomas A). The personal information has occupied a
credit card market in overall world has prominent place. Previously, Point of
expanded drastically that the issuers of Sale (POS) terminals used to generate
foreign countries has introduced mobile transaction slips visibly indicating the
phone credit cards for the convenience cardholder personal information such as
of their customers.(Amin, 2008) This, name of the cardholder, 16-digit Card
coupled with the entry of foreign banks, Number, date of expiry, etc., which can
has greatly increased the number of easily be used for fraudulent purposes.
credit cards available, and hence such The State Bank of Pakistan has taken
spending in Pakistan. Although credit several measures to enhance security of
card was introduced in Pakistan plastic money transactions in the
decades ago when Habib Bank, the country with a view to effectively
largest bank in Pakistan, launched its address customer complaints and to
gold card, but people had hardly know ensure continued growth in the fields of
about this card because of its very e-banking and e-commerce. (State Bank
limited issuance. Several years back, of Pakistan, August 23, 2008)
Master card was introduced by Allied
Bank of Pakistan which also didn’t According to status report of Q2 fiscal
receive that much appreciation. In 1994, year 07-08, total 6.7 million plastic
Citibank had introduced its VISA Card payment cards were in circulation which
and that was the turning point in the showed 2.5% increase over the
history of Plastic Money in Pakistan. previous quarter. Total number of credit
Citibank had done a tremendous job to cards in transmission has increased
edify people of Pakistan, as well as, from 1.62 million to 1.66 million for the
financial industry about credit cards and same quarter, registering an increase of
its significance in today's world. It was 2.5 % over the previous quarter. The
their aggressive marketing and heavy major portion of plastic payment cards is
investment in technology, that made absorbed by debit cards which comprise
deserving Citibank to be called the of 4.8 million users all over Pakistan, as
industry leader of Pakistan's credit card described in second quarter report of
business. After the success of Citibank fiscal year 2007-08, issued by State
card, Muslim Commercial Bank, Bank of Bank of Pakistan. (State Bank of
America, and National Bank of Pakistan Pakistan, 2008)
had launched their credit cards. In the
very near future we are expecting more
local and international banks to enter
So overall we can say there is growth in • Why people are not attracted
this field, but still some particular forces
are acting as barriers that impede towards credit card.
people to use credit cards and for the • Why cardholders are using there
better growth of this industry these
barriers must be immediately identified credit cards less frequently.
and cured. • Whether there is discrepancy at
This research report proceeds with card issuer’s end or there are
explaining the problem statement, some constraints in customer’s
followed by findings of the previous
researchers written under literature perception.
review and theoretical framework.
Afterwards, model and methodology of
the analysis will be explained. Literature Review
Methodology section includes sample
selection, sampling techniques and Although there is substantial literature
analysis techniques employed to back on credit card usage and adoption
the results of the findings. Further, internationally but in Pakistan research
findings section is established where the work on plastic money is limited and
results of the research are elaborated. don’t provide insight of consumer
Lastly, some recommendations and attitude. There is a need to explore the
implications are presented along with reason of consumer attitude about ‘Why
the limitations faced by the panel of they are not attracted toward plastic
researchers. money, especially credit card?’
A number of factors are identified based

Problem statement on evidence of previous literature. In this
study these factors are examined under
Few years back, it has been estimated the approach, as a barrier in use and
that there are likely to be around half adoption of credit cards. This study
million potential card users, in the near includes the factors, which influence the
future adoption & usage of credit card and are
(http://www.instecdigital.com/1/plastic.ht classified in the five main categories.
m). According to SBP report the These categories are Demographic,
tendency of number of cardholders is Awareness, Cost, Function and Socio
increasing. But the major portions of Psycho Factors. These categories
people are attracted toward debit cards. comprise of various variables, which
Acceptance of credit cards among the play a significant role in the adoption &
general audience has been quite low in usage of credit card, in the context of
comparison to debit cards and ATM Pakistan. The findings of main
cards. Still major proportion of publications are summarized below.
population is not having credit card or
avoid to use it even they have sufficient
resources and affordability of credit
cards. There is a need to explore the
reasons of such problems in Pakistan
as:

Demographic strong determinant of credit spending

that is young adults had higher credit
outstanding compared to elderly people.
• Income Likewise Chirapanda and Yoopetch
(2008); Delener and Katzenstein (1994)
The effect of demographic factor like make the case that the middle age
income on the usage of credit cards was people are more likely to use credit
studied by various researchers in cards. Nevertheless, previous studies by
different settings. Two researchers, Shannon and Yoopetch (2002)
Mandel (1972), and Kinsey (1981), suggested that older people tended to
identified that income is a primary have more credit cards. Pakistan’s
determinant of credit card usage and culture is non-innovative, even the
families with different income categories youngsters feel fretfulness to adopt new
perceived pros and cons of credit cards techniques, so the elders have lesser
differently. Similarly Worthington and probably to adopt credit card services,
Stewart (2007) concluded that high instead of having enough resources.
earners are more attracted towards
credit cards and mostly pay their bills on • Gender
time. Likewise, Peterson (1977) also
makes the case that there is positive Where gender is concerned, Gan,
relationship between credit card usage Maysami, and Koh (2008) found that
and income level which implies that high females possesses more credit cards
income people have high intensity of than males and also females of lower or
using credit cards. In addition the middle income group see them as status
researcher identified in Hong Kong that symbol. Various researchers found that
income is only the demographic factor females used their credit cards more
influencing credit card usage between frequently and they gave the view that
active and inactive cardholders Chan females tended to have a higher
(1997). Again it is possible to see how average number of credit cards than
Lu (2004) agrees with above mentioned males. Contradicting this, others
researchers by identifying that higher suggested that single males were more
the income level of cardholder the more likely to use credit cards than females
he is attracted to use credit cards. All (Kinsey (1981), and Slocum and
above findings indicates that high Matthews (1970); White (1975), and
income people are more frequently use Adcock et al. (1977); Kinsey (1981) and
credit cards but the average income Arora (1987); Hayhoe et al. (1999);
level of Pakistanis is comparatively low, Armstrong and Craven (1993); Chan
which is one of the major problem that (1997)). On the other hand, Delener and
resist use and adoption of credit cards. Katzenstein (1994) found that females
use more credit cards in Asian and
• Age Hispanic culture. In Pakistan, the
proportion of working women is less as
Age is also one of the most important compared to men so the scenario may
demographic factors and interpreting it be different over here.
for current study may give a general
result that as the age of the individual • Marital Status
increases, its demand for credit also
increases and hence the usage of credit In explaining the demographic factor
card may enlarge. Gan, Maysami, and marital status, researcher gives the view
Koh (2008) recognized that age is a that single persons hold least number of

credit cards than the married ones (Gan, Awareness

Maysami, and Koh, 2008). Explaining
same fact for Asian and Hispanic
culture, Delener and Katzenstein (1994) Awareness is such a variable that is of
found single respondents used more utmost importance. If people do not
credit cards in those cultures. Martal know about anything it is obvious they
and Fitts (1981) indicated that high will not be using that product or service,
income; married individuals have used if proper information, when required, is
more bank credit cards relative to other delivered to the people the awareness
credit cards. The contradiction in views for that product may be increased and
is due to different cultural backgrounds. hence the usage. Same is the case with
credit cards. The impact of awareness
• Education on usage of credit cards was studied by
Delener and Katzenstein (1994) found
that Asian and Hispanic consumers
Eccentrically the education level of the
didn’t prefer credit card so there is a
people has an affirmative effect on the
need to promote credit card services to
consumption of plastic money.
encourage its use. Similarly Chan
Worthington, Stewart, and Lu (2007),
(1997) found that inactive users of Hong
quoted that as the education level of
Kong having more tendency to influence
consumers of China increases, they are
due to promotion. In addition Chan also
more attracted towards credit cards.
suggested the use of “leaflet”. Leaflet is
Occupation or employment is also of
a paper providing detailed information
same importance as education.
regarding benefits associated with the
Supporting previous findings, in studying
use of credit cards. Likewise Devlin,
Asian and Hispanic culture, Delener and
Worthington and Gerrard (2007) make
Katzenstein (1994) indicated that
the case that credit card issuers must
respondent belong to high school
offer discount for promotion. In addition
degree are more likely to use credit
Durkin (1970-2000) suggested that
cards.
issuers are required to provide all
relevant information regarding credit
• Occupation: card terms at the time of issuing credit
card.
Occupation is one of those demographic
variables that may affect usage of Gan, Maysami, and Koh (2008) found
plastic money directly. If person is well that people's lack of understanding or
employed, he or she might want to use minimal information of industry is one of
easy payment procedure whatever the the biggest dilemmas in the credit card
cost maybe. Study conducted by Chan market. This lack of information affects
(1997) found around 2/3rd of the target adoption and usage of credit cards big
respondents were well occupied and time. Another set of researchers
they admitted that they had used credit identified that informational barriers
card more than once. On the other side, impede the ability of credit card
Delener and Katzenstein (1994) found in customers to obtain a competitive
Asian and Hispanic cultures that 25.1% interest rate through search. (Calem,
of card holders were belonged to labor Gordy, and Mester 2005). In all above
category. mentioned findings awareness is
described in different dimensions, which
are important to be considered in
Pakistan’s settings, where people do not

exactly know credit card terms and lowest transaction cost. Lunt (1992) has
conditions even the credit card users. said that adoption criteria of credit card
depend on high credit limit, quality
customer services, fair fees and fair
Cost interest rates. Chirapanda and Yoopetch
(2008) put forward a study on the credit
Cost is the complications and difficulties card market of Canada. Two proposals
a person face in using and adoption of are contrasted here. National Liberal
credit cards. It is as important as income Caucus report suggested, “The
level. A study conducted by White government should consider an interest
(1975) suggested that “rational cap mechanism for all credit card
consumer accepts only those means of accounts for retailers and financial
payment that reduce the cost of making institutions.”(p.146). the reason behind
transactions”. In Pakistan’s scenario, the this proposal was the interest rates on
consumer is not rational and cannot use credit cards in Canada are very high, in
new methods or techniques properly in spite of competitive market environment.
addition to that the services rendered by The other MacKay Commission reported
issuers of credit card are not enough, that,” providing new sources of
resulting this scheme of payment competition to traditional suppliers
become more complicated and costly. through application of new technology
and new ways of thinking about these
In this research cost is classified in two products.” (ibid, p.27) This commission
sub-categories, for the sake of didn’t emphasize on higher interest
convenience, to manage all cost related rates but has given the importance to
factors. new technological advancements. It was
concluded by Barry Scholnick that
1) Monetary Cost (like interest rate, interest rate ceilings are not necessary
annual fee, credit limit, type of for market regulation. It will discourage
transaction): the cost in terms of money. the Consumer credit card market. In
Pakistan, interest rates charged are also
2) Non- Monetary Cost (like low on the higher side and people see
acceptability, long application approval interest as non-Islamic activity, so it
time, shortly payment period, legal creates enough amount of barricade for
requirement complications and people that they avoid to use any kind of
difficulties in paying bills) credit card. Also the interest rate
structure is so much complex that a
1. Monetary simple person gets confused whether it
is reasonable or I am going down in a
well.
• Interest Rate
• Annual Fee
The effect of interest rates on the
adoption and usage of credit cards was
Annual fee is the amount charged by the
identified by Gan, Maysami, and Koh
issuer for holding the card for at least a
(2008) which concluded that interest
year. It is usually charged at the end of
rate is an important factor in the credit
every year through deduction from the
card usage which influences it
bank account or direct payment. But the
negatively. Brito & Hartley (1995) has
cardholder is duly informed about that.
said that using credit cards involves
Chan (1997) found in Hong Kong that
borrowings, paying high interest rate but
active and inactive card holders
it is attractive instrument in case of

demanded low annual fee and long • Type & Size of Transaction
interest free payment periods.
Chirapanda and Yoopetch (2008) White (1975) found that small size and
indicated that bank marketers should large size of transactions enhance the
adopt low annual fee for domestic as cost of making payments that
well as world wide credit cards. discourage use of credit card.
Shannon and Yoopetch (2002) found
that premium cards have more annual
fee (almost twice) as compared to 2. Non-monetary
regular credit cards. They found
negative relationship between the White (1975) indicated that fixed cost
annual fee and card usage. Arthur and must paid by the card holders it may
Dimitris (1994) investigates the include time cost, energy cost and
economy variables which have relative psychic cost.
importance in credit card selection
criteria. It includes joining or annual fees • Low Acceptability
by which credit cards are perceived as
expensive. Most of credit card issuing Chirapanda and Yoopetch (2008)
companies charge a high joining or suggested that issuers of credit card are
annual fees, but do not mention in required to contact with different
promotional activities. In Pakistan, business that accepts there credit cards
although the complete information is for the purpose of increasing number of
provided but, as the plastic money collection points. Chan (1997) found in
industry is not that flourished, they Hong Kong that credit cards of inactive
charge higher fees which can hinder users are not widely accepted because
people from using credit cards and of their unlimited usage rate.
make them say that “credit cards are Acceptance of credit cards should be
expensive”. facilitated by merchants at their outlets.
Yiing Jia Loke (2007) investigated the
• Credit Limit determinants which influence their
participation in credit card payment
Gan, Maysami, and Koh (2008) quoted schemes. He classifies the determinants
that generous credit limit is one of the in three categories, merchant’s
important variables that count at the background, business characteristics,
point of sale. They also cited that an effects of other player’s decision on
increase in credit limit also generates a merchant’s perception. Merchant’s
significant rise in debt. Chan (1997) in background includes his age (indicate
Hong Kong found that inactive card negative relation with merchant
holders were not feeling comfortable acceptance), number of personal credit
with their credit limits. Chirapanda and cards held (positive relation), and
Yoopetch (2008) found in Thailand that computer user (to check the likelihood of
majority of respondents give importance adopting new technology). In second
to high credit limits. As far as Pakistan category the business sector and value
market is concerned, they are offering of transaction influences on merchant
reasonable credit limits but the needs of decision. The usage of card by
people are on the higher side so they customers for bill payment and
demand superior credit limits than what acceptance of credit cards by
the issuers are offering. competitors have strong impact on
merchant participation in credit card
payment schemes. Chirapanda and

Yoopetch (2008) found 72.3% of credit cards fraud or in the case of card
respondents give importance to lost/stolen. Bills and balances should be
acceptability of their card at international accurate. And these cards should be
level. insured by credit card companies.
• Long Application Approval Socio-Psycho

Time
Chan (1997) found in Hong Kong that • Type of Users

some of the issuers were using short
application approval time to encourage Devlin, Worthington, and Gerrard (2007)
adoption of credit cards. found that credit cardholders are of two
types, first one is convenience users
• Short Repayment Period and second type is installment users.
Whereas Worthington, Stewart, and Lu
Chan (1997) also found that active and (2007) divided the type of users into two
inactive card holders demanded long groups, that was of transactor and
interest free period. Chirapanda and revolver. They also concluded that
Yoopetch (2008) suggested longer transactor users find it easier to pay
payback period to bank marketers to through credit card rather than cash.
meet competition Another set of researchers identified
that people in the low socio-economic
classes use their cards for financing
purposes and people belonging to high
Functions socio-economic classes use it for
convenience. (Gan, Maysami, and Koh
2008)
• Ancillary or Non-price
benefits • Life Style Patterns
Chan (1997) suggested provision of Mathew and Slocum (1969) exposed
ancillary functions that can enhance the relationships between social class and
usage rate. Ancillary Function means income and usage of credit cards.
other benefits like ATM services or Debit According to this research the purpose
Card services that may be offered of credit card usage is convenience for
additionally. upper social class and installment for
lower social class. Joseph T. Plummer
• Service Quality (1971) carried out study on the life style
patterns and usage of bank credit cards.
Chan (1997) suggested that card On the basis of demographic and card
issuing company should affectively usage data, the higher income, better
manage and handle complaints of their educated, middle aged, professional
card holders. segment is more important for potential
segment of market. A set of life style
• Security patterns like contemporary and risk-
oriented are more likely to use credit
Arthur and Dimitris (1994) found that cards for payment purpose. Whether the
security is an important attribute in the traditional and conservative (for
selection criteria of credit cards. Security instance, financial transactions should
is in two senses, as protection against be made in cash) approach towards

one’s life style may be an important

barrier in the credit card usage. Arthur PU is defined by (Davis, 1989) as
Meidan & Dimitris Davos (1994) “degree to which a person believes that
identified that card’s image is important using a particular system would
for status conscious users, as it assigns enhance his/her job performance.” It has
them prestige. a positive relationship with the USINTs
(Cheong & Park, 2005; Chiu, Lin, &
• Card Design Tang, 2005).
Devlin, Worthington, and Gerrard (2007) PEOU is a degree to which people

studied the reasons that why certain believes that anything that is used will
cardholders always have a main card be free of effort (Davis, 1989). It has a
and concluded that about 7 % of the positive effect on USINTs (Guriting &
users are attracted by card's design and Ndubisi, 2006; Davis, 1989; Kleijnen,
appearance. They use one of their cards Wetzels, & de Ruyter, 2004; Wang,
more frequently because it is pleasing to Wang, Lin, & Tang, 2003).
the eye.
PC is perceived security; it means that
how much a card is secure (Wang,
• User's Intentions Wang, Lin, & Tang, 2003). It has
positive relationship with USINTs
User intention (USINTs) is very (Wang, Wang, Lin, & Tang, 2003; Luarn
important in determining the perceived & Lin, 2005).
barriers in adoption & usage of credit
cards. According to Amin H., (2008) AIMC has positive relationship with
there are five elements; through which USINTs (Sathye, 1999; Howard &
we can measure the user’s intentions. Moore, 1982). AIMC is the information
These are Perceived Usefulness (PU), about the credit crad (Amin H. , 2008).
Perceived Ease of Use (PEOU),
Perceived Creditability (PC), The PE is defined as one’s ability to express
Amount of Information about Credit his/her thoughts (Cassidy, Park,
Cards (AMIC) and Perceived Butovsky, & Braungart, 1992). It has
Expressiveness (PE). This is also positive relationship with USINTs (Amin,
supported by the (Guriting & Ndubisi, Muhammad, Hamid, & Lada, 2006;
2006; Kleijnen, Wetzels, & de Ruyter, Nysveen, Pedresen, & Thorbjornsen,
2004; Pikkarainen, Pikkarainen, 2005; Plant, 2001).
Karjaluoto, & Pahnila, 2004; Venkatesh
& Morris, 2000).

MODEL
Demographic
Age, Income, Gender,
Marital Status, Education
& Occupation
Awareness
Information Level,
Information Source
Adoption &
Usage of
Cost Credit Cards
Monetary and Non-
monetary
Socio-Psycho
Ancillary Functions,
Service Quality, Security
Functions
Type of Users, Life Style
Patterns, Card Design,
User’s Intentions, Trust,
Culture

resist people to adopt credit card as a

Hypothesis mean of payment. The second purpose
was not to limit itself to identifying those
Awareness: - perceived barriers but also to explain
the relative significance of each attribute
that has influence on customer’s
H0: Awareness has positive relationship attitude. This study will be helpful for
with adoption &usage of credit cards. card issuing companies to adopt such
strategies that will reduce the impact of
Monetary Cost: - perceived barriers, for the purpose of
meeting nationwide as well as
H0: The greater the monetary cost, lower worldwide competition. The card issuer
the usage & adoption of credit cards. may get momentous information from
the findings of this research that will be
Non-Monetary Cost: - accommodating in designing their
marketing strategies, which will position
H0: If the non-monetary cost is their product high in customer’s mind.
increasing than the usage & adoption of
credit cards is decreasing.
Research Design and
Methods
In lights of previous studies conducted
by researchers like Worthington &
Stewart (2007), Chan (1997), Gan,
Objectives and Maysami, & Koh (2008), Chirapanda &
Significance Yoopetch (2008), Slocum & Matthews
(1970), Kinsey (1981) etc. and in-depth
The aim of this study was twofold; first interviews with bank managers, a set of
one was the identification of perceived five factor was identified which were sub
barriers that cause low usage among divided into 26 attributes. Classification
cardholders and to explore factors which of these factors is given below:
Factor # 1 Demographic:

Age

Gender

Income

Marital status

Education


Occupation

Factor # 2 Awareness

Information
Factor # 3 Cost
o o
Monetary Cost Non-monetary Cost
1 1
) Annual fee ) Acceptability
2 2
) Interest rate ) Application approval time
3 3
) Credit limit ) Repayment period
4
Legal requirements
)
complications
5
) Difficulty in paying bills
Factor # 4 Function

Ancillary function

Service quality

Security
Factor # 5 Socio-Psycho

Types of users

Perception


Lifestyle patterns

Card design

Appearance

Trust

User’s intentions

Culture

In Hong Kong, a study “Customer’s risk having or not having credit cards.
perceptions of electronic payment (Bartlett II, Kotrlik & Higgins 2001).
systems” conducted by Simon S. M. &
Victor T. F. Ng (1994). They viewed
cash and credit cards as traditional
Collection of Data
forms of payment as compared to
For the collection of data, questionnaire
electronic payment system. But, in
data collection technique was used and
context of Pakistan, transactions
the sample size or number of
through credit cards are considered as
respondents, belonging to target
modern mean of payment, by which it
population, was 159. These
can be assumed that credit card market
respondents were approached by five
in Pakistan is at its initial developing
trained interviewers which facilitated the
stage and has low competition level as
respondents to provide right kind of
compared to other countries. The
information. These respondents were
functional and socio-psycho factors
selected through convenience sampling
mentioned above can be properly
approach from all over the city and, to
analyzed where intense competition
some extent, from other cities of Punjab
exists in the market, which is obviously
like Multan, Faisalabad and Lahore etc.
not in the case of Pakistan.
We had defined our population as
Demographic, awareness, cost and
person’s having at least one credit card
security factors were examined through
and non-cardholder individuals having
this comprehensive approach. The
sufficient resources.
reasons for not focusing on the other
two factors were time constraints and
difficulties in data collection. Analysis
Population and Study Sample As this research was of comprehensive

and comparative nature, means and
In this research our target population standard deviations of the two segments
was both cardholders and non were analyzed. For further deep findings
cardholders and we had collected data and validation of the study results,
from both. Comprehensive approach parametric technique of t-test was used.
was used in this study where two forms In t-test, level of significance was
of barriers were variable of interest. First compared with the p-value calculated
was perceived usage barriers among through the test and simple hypothesis
cardholders, and the second was and decision rule was employed. The
perceived adoption barriers among non hypothesis for t-test were
cardholders.
H0 = No difference among the means
of two segments.
Sample Size and Selection of
Sample H1 = There is some significant
difference between the two.
As our target population was mainly
Bahawalpur, on the basis of which If the p-value of the data was found to
results will be generalized so sample be less than the significance level (5
size selected was around 159 people percent), the null hypothesis will be
belonging to different cities (like Multan, rejected.
Lahore, Islamabad and Bahawalpur)

Findings & Discussion

The data of 159 respondents consisting different cities of Pakistan for the
of both cardholders and non- purpose of this particular study.
cardholders were collected from
Customer Characteristics Frequency Percent

Age Below 25 51 32%
25-35 59 37%
35-45 22 14%
45 and above 27 17%
Gender Female 64 40.3%
Male 95 59.7%
Marital Status Single 74 47%
Married 85 53%
Religion Islam 159 100%
Occupation Govt. employee 45 28%
Business 28 18%
Student 36 23%
Landlord 24 15%
Others 26 16%
Education Level Matriculation 6 4%
Intermediate 10 6%
Bachelors 62 39%
Masters 78 49%
Other 3 2%
Income Level Below 20,000 56 35%
20,000-30,000 32 20%
30,000-40,000 36 23%
40,000-80,000 31 19%
80,000 and above 4 3%

The study examined over 150 banking Income is a big barrier in adoption of
customers in Pakistan in terms of their credit cards. Most of the respondents
demographic background, including were from a lower income group and
gender, age, income and education. Of they simply don’t have enough
the 159 respondents, 95 respondents resources to have such plastic payment
(59.7% percent) were male and 40.3% card. Worthngton, Stewart, and Lu
were females. The largest respondent (2007) identified the similar or
group (37%) was from the age group of complimentary results which showcased
25-35. Most of them were married results almost similar to our research.
(53.5%) while the single respondents
were also of equal magnitude (46.5%). The above paragraph described
Out of 159 respondents, 28.3% were demographic characteristics of the
government employees. The mostly sample. Now the tested results of
responded group belonged to the low variable categories will be elaborated. In
income group i.e. Below Rs.20, 000 this paper t-test is used in testing the
(35.2 percent). The majority of the null hypothesis for equality of means of
respondents held Master’s degree cardholders and non-cardholders. The t-
(almost 50%). The people had more test will indicate whether the means of
tendencies to have the personal account the subject under study were
than business and around 89.3 percent significantly different, that is, the
had the personal account. observed difference between the
As demographic factors are taken as sample value and the hypothesized
independent variables, their impact can value is true and cannot be due to mere
be felt on the dependent variable. chance.
Demographics have dual nature; they
can be taken as independent or Tables provide the descriptive statistics
moderate variables. But for this study, and the t-test of the both segments i.e.
we had considered it as independent cardholders and non-cardholders. To
variable, in order to find their association determine whether the differences in
with previous findings. means were significant, the p-value
must be less than the 0.05 or 5 percent
Gan, Maysami and Koh (2008) level. The decision rule is “if the p-value
proposed that females tend to use more is less than 0.05 the null hypothesis i.e.
credit cards, but our research found (no difference among the groups’
completely opposite results, as the most means) will be rejected”.
of the cardholder respondents were
males.

TABLE 1
Awareness
Non-
Cardholder cardholder P-value
Mean S.D Mean S.D
Level of Information 3.15 0.82 2.30 0.77
Information Sources:
Friends and Family 1.96 0.76 1.76 0.7 0.090
TV programs 1.83 0.70 1.49 0.55 0.001
Internet 1.85 0.80 1.56 0.75 0.018
Bank Staff 1.99 0.76 1.71 0.77 0.027
Company Advertisements 1.85 0.67 1.68 0.64 0.096
Brochures 1.76 0.75 1.45 0.61 0.006
The first section of the research sought that; they receive information from their
to identify the awareness level of people relatives or colleagues that are already
of Pakistan about credit cards. For this using such payment procedures. So,
purpose two questions were asked from companies that are keen to increase the
the respondents, purpose of which was awareness level of consumers should
to identify the level of awareness and focus advertisement through various
source from which both the segments of available channels like television
the research i.e. cardholders and non- programs, brochures company
cardholders receive information about advertisements and bank staff
credit cards. The results showcased in cooperation.
the table 1 purports that majority of the
respondents do know about credit cards When we talk about cardholders their
but not enough detail. More than half main source of information is bank staff.
percent respondents asserted that they They state that the employees of their
don’t possess complete information bank provided information regarding
about credit cards but they are also not credit cards and persuaded them to
ignorant about this payment adopt it. Now if any new offer is
mechanism. In order to create launched or any charges are imposed
awareness among the general they are duly informed by their bank
audiences, issuing companies must managers. As far as level of awareness
provide information to people through is concerned, it is quite obvious to
different mediums. observe that almost all of the
respondents would have experience of
Now the medium of information is also using credit cards.
of utmost importance. Some people
receive valuable information about When we compare the results of
things through advertisement or friends cardholders with the results of non-
& family or all the way through most cardholders, it is evident that the main
advanced method, internet. The source of information is different for
research survey found that for non- both. On one side cardholders receive
cardholders, most helpful source for extensive information from bank staff,
receiving the information about credit while non-cardholders have a little bit
cards is Friends & Family. This purports knowledge from the colleagues and

family members. This difference is both groups. Other variables are close
statistically proved by the use of t-test, to each other and mean difference
where t-value depicts that brochures or between the two segments may be due
leaflet is that information resource which to sampling error.
has the statistically different mean for
TABLE 2
Perception
Non-
Mean S.D Mean S.D
Overspending 3.64 1.05 3.30 1.22 0.059
Overspending Fault 3.76 1.01 3.89 1.13 0.438
Interest on Loan 3.36 1.07 3.17 1.48 0.344
Islamic Values 3.43 1.08 3.20 1.51 0.280
Debt 3.32 1.02 3.48 1.16 0.369
Security Risk 3.15 1.09 3.42 1.14 0.130
Adopting new technology 3.56 0.90 3.64 1.21 0.623
Consumers without credit cards 3.08 1.16 2.89 1.11 0.300
Online Payments 3.89 1.09 4.26 0.81 0.016
Payment on outlets 3.64 0.92 3.77 1.11 0.414
Table 2 presents some of the create as such barrier in adopting or

perceptions or perceptual problems of impeding the use of credit cards.
Pakistan people, regarding credit cards. However, statistical tool t-test reveals
contrary results. The p-value for the
The results generated by applying data is greater than the significance
SPSS techniques reveal the mean value level 0.05 which means null hypothesis
of 3.30 with standard deviation of 1.220, (no difference among the means) is
which implies that a large proportion of accepted. Any difference occurring may
audience agree or somewhat agree that be due to chance.
credit card usage may lead to
overspending. The research survey Our results comply with the findings of
found that there is a general perception previous researchers like (Worthington,
among the people that credit card Stewart, & Lu, 2007) where they
ownership generally motivates people to identified the general perception of the
spend out of their pockets. When we people of China which was same as of
compare this result with the cardholder Pakistani’s. They concluded the
one, it is evident that its intensity is quite revolving credit card users tend to shop
strong there with the mean value of 3.64 more than their budget as they are more
and relatively less variance. In addition, aware about the risks and cost of
both users and non-users of credit cards overspending.
agree that this overspending is the fault
of consumers and not the issuer’s. So it Previous researches conducted in
is consumer’s responsibility to manage different Islamic states like Saudi
and control its spending and it does not Arabia, Turkey and Uzbekistan have
found that people often feel credit cards cards. They mostly use it for installment
as against Islamic laws because of the purpose i.e. to clear off their bills and
inclusion of interest (which is purely pay later. So, they themselves dig into
against Islamic values, denoted as debt and know several ways to get out
Riba). Our research, conducted in of it. Previous researchers including
Pakistan, has found analogous type of Devlin, Worthington, and Gerrard (2007)
results. The mean calculated for non- found that credit cardholders are of two
users implies that people of Pakistan types, first one is convenience users
generally perceive it as against Islamic and second type is installment users.
values. But a serious fact to be noted Whereas Worthington, Stewart, and Lu
here is that the variance in the results is (2007) divided the type of users into two
on the higher side i.e. 1.511. This groups, that was of transactor and
explains that people are not sure about revolver. They have proposed the
it which is mainly due to lack of concept to distinct type of users and this
information. This wrong perception is vary concept can also be applied in
generated because of less information Pakistan where both type of users
regarding its working. So, companies exists. To find out is this difference in
must generate awareness among the the means of cardholders and non-
people and educate them how it is free cardholders statistically significant, t-test
from interest. On the other hand users was executed. The results found that
of credit cards also feel that it is against there is no significant change between
Islamic values, so they are trying to the two means and any difference
avert its usage. The issuers must occurring is due to sampling error.
address this issue as this is turning out
to be the bigger barricade in the Security of the payment mechanism is
development of plastic payment system one of the key concerns for the people
in this country of southern Asia. of Pakistan. When, a research question
However p-value results provide relating to judging the perception of
differing results. It states that, there is users and non-users about the security
no statistically significant difference of credit card or loss of money in case
between the two means as p-value is card is lost or stolen, the responses
greater than the significance level. were obvious. Majority of the people
perceive that credit card is most likely to
A research question was quoted to be lost or stolen. The people which are
know the people’s perception of debt not using it perceives this security issue
creation as a result of using credit cards. as a obstruction in their adoption
The research survey found that non- process while its intensity is quite weak
cardholders perceive that issuer’s of in terms of responses generated by the
credit cards make it hard for people to current users of credit cards. They
pay off their debt by imposing additional claimed that there is no issue of losing
interest expenses and charges. This money in case credit card is lost or
perception acts as a barrier in the stolen, so they are not avoiding using it
adoption of credit cards among the just because of the security issue, there
people of Pakistan. But, the other must be some other reasons. Security
segment that consists of users of credit doesn’t affect the users may be because
cards not intensely agrees with it. The they are more aware about its features
results generated show somewhat and understands the importance of pin
agreement by the users, so we can code without which nobody can utilize
conclude that Pakistani users of credit the card even if the owner forgets the
cards don’t think debt burden as a pin code, he may not able to use also.
barrier in their less frequent use of credit However statistical significance analysis
revealed that there is no considerable change or happy to adopt newly

difference among the means and any developed products which may endow
disparity occurring is due to chance or with benefits. This has resulted in
sampling error. Worthington, Stewart, & infringement of erroneous perception
Lu, (2007) addressed same security about Pakistani people. Although this
issue in relativly different population mean value is generated through a
setting of China found contrary results sample profile but because of the vary
where respondents highlighted certain nature of research this can be
security issues which are to be resolved generalized to whole population. The
in an attempt to increase adoption of mean value of 3.64 for non-users has
plastic payment mechanism. clear meaning that people welcome new
technological products if they are
People of pakistan are considered to be provided with certain beneficial features
backward and those kind of inhabitants for the users. The intensity of agreement
who do not want to acclimatize to is almost same for cardholder as for
changes. So we considered this issue non-cardholders, which can be
to find out whether this change resistant interpreted as advancement in the credit
nature leads people for not adopting or card features is not the cause of their
using the newly developed state of the impeded use of it. Conversely t-test
art payment contrivance i.e. credit results provide different results. It states
cards. A research question was quoted that there is no significant difference
to know whether the people of pakistan between the means of cardholders and
are change defiant or not. The survey non-cardholders and any discrepancy
found surprising results which declares occurring is due to chance or sampling
that people are open to any kind of error.

TABLE 3
Cost
Non-
Mean S.D Mean S.D
Interest rates 3.13 0.98 3.10 1.17 0.825
Credit card limits 3.48 0.83 3.18 0.88 0.028
Information about charges 2.79 1.31 3.06 1.10 0.155
No. of outlets in Pakistan 3.32 1.02 2.89 1.09 0.012
Acceptability abroad 3.44 1.07 2.80 1.16 0.000
Repayment period 3.41 0.95 3.26 1.04 0.341
Clearing Full Balance 2.97 1.31 - - -
Large Size Transaction 3.53 0.79 - - -
Paying Centre in Hometown 3.20 1.07 - - -
Security Features 3.15 0.94 - - -
Application Approval Time - - 3.13 1.17 -
Up till now, we were addressing some almost equal mean but relatively less
perception errors by the general public variance. It means the current users are
with respect to using or not using credit also limiting their use because of
cards. But there are certain monetary inequality among the interest rate
and non-monetary costs are also charged and benefits received. Similar
present which are to be borne by the results found when t-test was used to
person in using or adopting a new thing. identify the mean difference. It resulted
If these costs match the benefits it in same less significant divergence
provides than people move toward it among the two means which is
otherwise rejects it. As mentioned in ignorable. There are numerous studies
Table3, the first of the monetary costs is identifying the impact of interest rates on
interest rates. When the respondents the adoption and using of either credit or
were asked to tell whether the interest debit cards. Some valuable researches
rates charged on credit cards comply were conducted by (Gan, Maysami, &
with the benefits it provides the Koh, 2008), Brito & Hartley (1995),
responses were ambiguous. The Chirapanda and Yoopetch (2008) and
respondents, who haven’t applied for Lunt (1992) identified same results but
credit cards were indifferent in replying in different settings. They found that
to it as they had no information increasing rate of interest affects the
regarding interest rates being charged adoption of credit cards negatively in
today. But the respondents who had countries like China, Thailand, Greece
applied for it but didn’t proceed and Egypt which comply with our results
disagreed with the statement. They generated through a research
claimed current interest rates are very conducted in Pakistan.
high and benefits that can be accrued
from the use of it are not equivalent. So, In order to find whether the people are
this acts as a barrier in their adoption of satisfied with the current credit limits
credit cards. On the other side, offered by issuers, a research question
cardholders, either revolvers or was quoted to find its significance
convenient users’ responses resulted in among the population. The survey found
that cardholders are generally satisfied of adoption and usage of credit cards. It
with the current prevailing limits, but may act as a barrier depending on the
non-cardholders perceive it as a barrier geographical location of the concerned
as they consider it low. This difference person. If we talk from the point of view
in the mean values is statistically proven of Pakistan, people living in Karachi,
fact as p-value of data is below than the Lahore or Islamabad may have greater
prescribed level of 0.05 which ultimately opportunities for using credit cards as
shows that the means of the two groups they have more outlets. But people of
is significantly different. So we can smaller cities like Bahawalpur,
conclude that this credit limit Hyderabad etc have less of those. Our
enhancement can act as a motivator for research finds that non users generally
the non-users and it has no or less agrees that there are less outlets
significance for cardholders. Similar accepting credit cards both domestically
results were found by various and internationally and this low
researchers like Chirapanda and acceptability results in perceived barrier
Yoopetch (2008), Chan (1997) and Gan, in their adoption of credit cards. The
Maysami, and Koh (2008). other segment of respondents that
consists of cardholders sees the outlets
It is perceived that banks or financial as satisfactory. This change may be due
institutions do not provide complete to change in geographical surroundings,
information about the charges or fees as data is collected on convenience
being charged on credit cards. A basis and a larger proportion of
research question was quoted to know cardholders is from the bigger cities of
its effect in Pakistan. The research Pakistan, that have more opportunities
findings concluded that mean value is for using it especially at petrol pumps
low in responses generated by the and retail stores. For further
cardholders as compared to those which authentication of the results, t-test for
are non-cardholders. The mean value of two sample means was run which
2.79 for users clearly explains that resulted in the rejection of null
complete information is not provided hypothesis. This means the differences
regarding charges as they had suffered between the mean value of two data
from certain hidden charges once they sets is significantly different. Our study
had adopted it. When we compare it comply with the results found by
with the results of non cardholder ones, previous researchers like Chirapanda
the change is not noteworthy but degree and Yoopetch (2008), Chan (1997),
of agreement is relatively high. The Yiing Jia Loke (2007), Chirapanda and
reason behind this maybe they don’t Yoopetch (2008) which also concluded
have experience and enough that lack of acceptability abroad may
awareness. When the means of the two result in less usage and adoption rate.
compared to know whether there is any
significant difference, this resulted in a In order to find whether shorten
simple answer “No”. The proposed repayment period acts as an obstruction
difference may be due to sampling error in adoption and usage of credit cards,
or some other reason. So, we can the results depicted that both users and
conclude that insufficient information non-users perceive it as barrier. But the
provided by issuers is creating equal percentage of barricade is stronger in
amount of barricade for cardholders as existing cardholders. Chan also
well as for non-cardholders. simplified this sort of result and explains
it as the more the interest free
The acceptability is one of the key repayment period, the more the rate of
issues in determining the increased rate adoption and usage of credit cards in
countries like Hong Kong and China. As admitted that their merchant accepts
the table suggests, there is no such payment through credit card irrespective
difference found in the means of the two of the size of transaction. The third
segments as p-value is greater than the question was related with the security
alpha. concerns of the users. The responses to
the question reveal an awareness of
Normally application approval time is 6 some of the security issues which still
to 8 weeks for allowing the applicant to bedevil the credit card product. The
properly use credit card. Although this responses were ambiguous which can
period is not very much high but a be interpreted as the cardholders are
passable proportion of respondents not so much satisfies with the security
considers it as long enough that features provided by the issuers.
eventually stops them from obtaining the According to them the issuers must
credit cards. This result is supported by include some superfluous security
findings of previous researchers that features that might help them to
include Chan (1997) and Brito & Hartley overcome their perceived security
(2001). concern and hence increase their
usage. On the basis of research findings
As the focus of the research is also on we can conclude that security is one of
the current users and finding the those factors which are affecting the
problems they are facing which cardholders massively and causing the
eventually turns out to be barrier in their circumstances which result in low usage
usage or encumbers them to evade among the Pakistani community.
using credit cards. A set of three
questions was asked by the existing
users to know the obstruction factor. The third section of the findings portion
The first one is to check whether the deals with explaining the variables or
users had missed their payment of factors those are important for both
outstanding balances which caused users and non-users in their decision of
their less frequent use of this payment adopting or using a credit card. This
mechanism. The result compiled research found their intensity i.e. how
through it concludes that majority of the important each of the variables is for the
respondents admitted that they had person thinking to adopt or use plastic
cleared their balance in full always and payment system and absence of which
they pay it completely not partially. The may eventually act as a barrier in the
second question was to measure process. These 12 variables and their
difference, if any, in the sizes of means for both cardholders and non-
transactions. Normally it has been seen cardholders is given below and for the
(as described by previous researchers sake of simple understanding these are
like Amin H., 2008 Devlin, Worthington, categorized in descending order where
and Gerrard (2007)) that merchants feel we can easily identify the variable or
hesitate to accept payment through factor that has more importance in the
credit card when payment is above than eyes of users and non-users. We will
the certain level (100RMB in China). But first explain the variable for non-
the situation in Pakistan is different. A cardholders and than for cardholders.
larger number of respondents have

TABLE 4
Barriers
Non-cardholder
Mean S.D
Lack of Information 3.95 0.98
High interest rates charged 3.92 1.31
Heavy additional charges 3.92 1.27
Short repayment period 3.80 1.06
Strict legal requirements 3.73 1.25
Complexity of information 3.71 1.09
High security risk 3.69 1.23
Long application approval time 3.57 1.31
Complexity of issuance procedure 3.49 1.00
Insufficient credit limits 3.39 1.11
Low international acceptability 3.21 1.39
Low domestic acceptability 3.20 1.37
The non-cardholders have a distinct for their not espousing the credit card.
tidy of these 12 variables as compared The issuer’s are increasing the interest
to cardholders which is quite obvious as rates and additional charges like annual
the two sections of the audiences have fee, transaction cost etc. which create a
different priorities and curious feelings big gap for low or middle income people
toward certain factors. The most in their desire of adopting a credit card.
important reason for not adopting the
credit card is Lack of information. The The fourth most mentioned reason was
respondents agreed that paucity of short repayment period. The survey
information provided by issuers is most results revealed that respondents put
important than the other listed variable importance to short repayment period as
which they consider before making the compared to other listed reason but not
decision about having a credit card or more than the already mentioned
which maneuver as a barrier in their factors. A large number of respondents
decision. The similar type of results agreed that they put importance to
were found by Delener and Katzenstein repayment period when they are
(1994) and Gan, Maysami, and Koh considering having a credit card and its
(2008) which also highlighted that Asian short life ultimately impedes them from
and Hispanic consumers generally not adopting it.
enthused to have a credit card because
of minimal information. The fifth listed reason is strict legal
requirement. The research survey found
The second important listed barrier is that people are wretched with legal
high interest rates and heavy additional complications attached with credit card
charges with the equal mean value but ownership and application form and they
the variance is more in interest rates. have jabbed their decision for adopting it
These two variables are interrelated and because of these legal complications.
respondents with no credit card said that Here we can conclude that legal
these two high costs are major reason requirements are working as a obstacle
for those persons who want to adopt this acceptability, both abroad and domestic.
payment mechanism and companies These two have the least mean values
should slant their requirements for better and so are at the bottom of table. The
growth of the credit card industry. survey respondents put very low or
somewhat importance to this
Complexity of information was acceptability factor. We can wrap up
mentioned sixth important barrier with that low acceptability of the Pakistani
the mean value of 3.71. This implies that credit cards in local and international
the information provided with the credit markets is not acting as a strong barrier
card brochures and other helping in the low adoption rate, however it is
materials is so complex that is not easy still perceived as a barrier by certain
to understand by a common man. The segments of people.
large number of respondents put this
complex information as a barrier in their
adoption process.
Surprisingly, high security risk

associated with credit card payment
system is put at the lower side of the
table. This shows that people without
credit cards are not hesitant enough to
use it because of security risk. However,
the intensity is still toward the most
important side but it has less importance
in the eyes of consumers as compared
to variables like interest rates,
information, etc. we can conclude that
high security risk is a less intensified
barrier in the adoption of credit card.
Some of the respondents put

importance to application approval time
and claimed that it is one of the factors
which they consider while making their
way to adopt credit cards. So, long
procedure and elongated waiting time
prevents them to adopt credit card and
sooner or later operate as a barrier.
The bottom two listed reason that has

somewhat importance in the eyes of the
respondents or people of Pakistan are
insufficient credit limits and complexity
of issuance procedure. These two are
also important barrier in the increment of
adoption rate of credit cards but has
relatively less importance as compared
to other listed variables.
The last two mentioned reasons for low

adoption rate in Pakistan are
TABLE 5
Barriers
Cardholder
Mean S.D
High interest rates charged 3.96 1.13
Heavy additional charges 3.95 0.85
Insufficient credit limits 3.95 0.90
Complexity of information 3.57 0.95
Low international acceptability 3.55 1.25
Low domestic acceptability 3.51 1.07
Long application approval time 3.49 1.12
Short repayment period 3.49 0.92
Strict legal requirements 3.41 1.15
Complexity of issuance procedure 3.25 1.10
High security risk 3.16 1.02
Lack of Information 2.95 1.17
The table 5 shown above categorizes customer fails to clear off his or her debt
the factors acting as a barrier in the low within the time limit. But the responses
usage rate of credit cards by current generated through the current research
cardholders. The list includes same type have concluded that high interest rates
of variables but the ranking of these and heavy additional charges are the
items is quite different as we had seen two major barriers which are
in the case of non-cardholders. This increasingly causing a decline in the
change in variables perceived usage rate of credit cards. If we look into
importance or intensity to act as a some of the previous studies has also
barrier is due to experience. The proposed similar results and found that
cardholder has the experience of using as the rate of two mentioned variables
it and has more in depth knowledge increases, the usage of credit cards
about its features. decreases in the countries like Hong
Kong, China and Singapore. (Gan,
The most important variables are heavy Maysami, and Koh (2008), Brito &
additional charges and high interest Hartley (1995), Lunt (1992) and
rates. These two have the highest mean Chirapanda and Yoopetch (2008)).
value as compared to other acting
variables. These two factors are rightly The next few items which are important
paying the bigger role of barrier in barrier in the limited or impeded use of
compelling cardholders to limit their credit cards are related with information.
usage or even quit it. The current The cardholder’s results divulge that
interest rates are very high which make they feel lack of information on how to
it difficult for the owner to clear off all the use the credit card and extent of
charges if he has missed a payment complex information are important
within due date. It must be noted here barriers but less than the monetary ones
that interest is charged only when explained above. On the basis of

research results we can conclude that such as short repayment period,

information is an important barrier in security risk, etc.
restricted use of credit cards among the
cardholders. The complete information Above discussion clearly states that the
is not provided to users with the help of variables affecting the adoption and
which they can utilize it in better way. usage rate of credit cards are quite
The domestic acceptability is one of the same but their importance to each of the
key issues in determining the usage of target segment is fairly different. On one
credit cards. Major proportion of people side, non-cardholders perceive lack of
have committed that there are not information as the biggest barrier in their
enough outlets available which accepts adoption of credit cards, while
credit cards or have POS machines for cardholders perceive additional charges
quicker transactions. The cardholders as biggest barrier. This change in
have put greater importance to domestic ordering of variables may be due to
acceptability and on the basis of this we certain facts. The first one is difference
can conclude that this low domestic in the sample sizes of the two. As the
acceptability is hammering the usage of sample size for non-cardholders is 84
credit cards. Another surprising result and that of cardholders is 75, which may
which can be derived here is that on one cause difference in the means. The
side respondents had mentioned greater second could be experience of using a
importance for domestic acceptability of credit card. The owners of credit cards
their cards but at the same time the have experience of using it and hence
results have proved less intensified provide internal features like interest
importance for international rates and annual fees as barrier to their
acceptability. This implies that holders of usage while the non-cardholders
credit card in Pakistan are mostly using (having no experience just information)
it in domestic market and not for online perceives external factors like
payments or abroad shopping. information unavailability and narrow
acceptability as a barrier.
The least important or lesser barrier for
the cardholders in increasing their Comparison of cardholders
usage is complexity of issuance
procedure with the mean value of 2.95.
and non-cardholders:
This creates the least barrier for
For further comparison of both
cardholders because they had already
segments, t-test was employed that may
gone through this process and accepted
strengthen the results by describing
credit card, now there are certain other
whether the differences between the two
variables that are acting as a barrier
means is significant or not.

TABLE 6
Barriers
Non-
Mean S.D Mean S.D
High interest rates charged 3.95 1.13 3.92 1.31 0.878
Heavy additional charges 3.96 0.85 3.92 1.27 0.799
Insufficient credit limits 3.55 0.90 3.39 1.11 0.337
Complexity of information 3.57 0.95 3.71 1.09 0.389
Low international acceptability 3.16 1.25 3.21 1.39 0.797
Low domestic acceptability 3.51 1.07 3.20 1.37 0.991
Long application approval time 3.49 1.12 3.57 1.31 0.606
Short repayment period 3.41 0.92 3.80 1.06 0.016
Strict legal requirements 3.25 1.15 3.73 1.25 0.015
Complexity of issuance procedure 2.95 1.10 3.49 1.00 0.001
High security risk 3.49 1.02 3.69 1.23 0.276
Lack of Information 3.95 1.17 3.52 0.98 0.013
It is evident from the p-value mentioned there is a chance that some of the
in the table 6 that there are no such factors may be ignored or provided
differences between the two results but with lesser amount of details.
some of the variables have shown
significant discrepancy for the two data • Due to exploratory nature of
sets. These variables are short study in context of Pakistan, the
repayment period, strict legal researchers focus was on
requirements, complexity of issuance convenience based sampling
procedure and lack of information. that was less expensive and
much quicker way to collect
information regarding variables
Limitations of interest. This may create
some of the sampling errors that
may affect generalizability of the
This section deals with the problems research.
faced by researchers during data
collection and sampling procedures. As
this research was conducted in Pakistan • The responses generated by
and was of pecuniary nature, there were non-cardholders may seem as
certain problems faced by researchers non-realistic, which is due to
which are listed below. their less information about
certain variables included in the
• The first and foremost limitation research.
of the study was time constraint. As
the researchers were the students • The majority of the females that
and had diminutive time to conduct have sufficient resources in
such an exploratory and meticulous Pakistan are housewives and do
research within the time line. So not have tendency to adopt or

use new types of payment • It was found in the results that

mechanism like online payment information attached with credit cards
system, internet banking or is of complex nature even
credit cards. This may be the cardholders doesn’t exactly know
reason that a major proportion of about credit card terms and payoff
data was collected through times. To reduce its complexity,
males as females have less issuing companies must provide
proportion of account holders detailed leaflets/brochures. They
and credit card ownership. should appoint authorized officers
(courtesy Bank Alfalah Limited) that will provide guidance regarding
features of the credit cards.
Recommendations Currently, Habib Bank Limited is
following this strategy and appointed
new staff members just to handle
As, the focus of research was, to identify
applications of credit and debit cards.
the barriers prominent, in Pakistan
capital market, causing low usage and
adoption rate of credit cards. Although • Cardholders are to think rationally
these variables are difficult to remove and should pay outstanding balance
but their impact can be reduced as most within predetermined time period to
of the variables are wrongly perceived avoid interest that is against Islamic
by the general public. In this context, values.
panel of researchers provides some
recommendations for both issuing • It is found in the results of the
companies and consumers, which, if research that most of the Pakistani
considered, may encourage the climbing people avoid using credit cards as
usage and adoption rate. they consider it against Islam
because of inclusion of interest. To
• Issuer’s are required to offer avert this perception, companies
discounts, gifts or bonuses if the should introduce the concept of
cardholders pay their outstanding Islamic credit card provided by author
balance within time limit. This will (Bakshi, 2006) currently eminent in
create psychological impression in UK. The other option could be to
the minds of consumers and will charge penalty instead of interest if
motivate them to pay their bills on some cardholders become habitual of
time. not paying balances on time.
• It was found in the study that • Longer and flexible payback period of
information level of respondents making finance payment with
regarding credit cards and its installment plans encourages the
features is quite low. The issuer adoption and use of credit cards.
companies must ensure the proper
flow of information to both
cardholders and non-cardholders. • One of the major problems is the
The provision of information should unavailability of paying centers and
be through advertisement using Pos machines in different outlets in
different promotional channels that Pakistan. To remove this issuer’s are
are close to the potential consumers. required to contract with other
businesses like petrol pumps,
domestic stores and financial
institutions that will provide credit

card services to customers in broader mechanism. In future, a study can be

way. directed just to identify the perception of
old age individuals regarding modern
• For increased acceptability among payment mechanism.
the people of Pakistan, banks and
other issuing companies must reduce Conclusion
their annual fees and additional
charges.
Present study has compared credit card
holders and non-cardholder in Pakistan,
using survey method. This analysis is
• Other ancillary functions should be attempted to identify almost all the
added with credit cards like debit factors influencing the adoption and
features ATM facility. This will usage of credit cards. In this study, the
broaden the market as one card can demographic profiles and usage
be used for more than one purpose. patterns of credit cards are reinforcing
the previous findings by Mathew and
Slocum (1969), Delener and
Implications & Future Katzenstein (1994) Worthington and
Stewart (2007). From the viewpoint of
Research potential market segments, the higher
income, better educated, middle aged
This research will be helpful for issuers and professional segments are more
to adopt different strategies that likely to be attracted toward credit card.
encourage use of credit cards by Both the groups (cardholders & non-
understanding consumer cardholders) placed a heavy emphasis
behavior/perception. on monetary cost including high interest
rates, heavy additional charges, and
Future researchers can focus on the last insufficient credit limit, imposed by
two classifications of the variables issuers. Non-monetary cost is also a
(Functions and Socio-Psycho) which are major barrier but its influence on
ignored in this study because of time consumer’s perception is rather lesser
constraint. than monetary cost. Usage and
adoption is greatly affected by
Future researchers, who want to do informational barrier, security risk, strict
further work in this field, may do in- legal requirement and low domestic
depth study of each of the variable acceptance.
identified to see its impact on behaviors
of the people. The future study could be In summary, credit card marketing
of longitudinal nature where data could campaigns should particularly consider
be collected twice, first, in the presence flexible interest rates, relatively less
of barriers and second after removing annual fees, more places accepting
those barriers and studying the change credit card, simplistic information and
is it significant or not. minimal sanctuary risk. All the above
suggestions should match the demand
In Pakistan culture, it is considered that and expectation of target market.
old age people are reluctant to adopt
new technologies or payment

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252.

ANNEXURES

Questionnaire For Cardholders
Introduction
We are the students of Department of Management Sciences of The Islamia
University of Bahawalpur. We are conducting a research to identify the perceived
barriers for adoption & usage of credit cards. This will let issuers know about your
concerns regarding credit cards. This questionnaire is also a part of this
research. We would like to have your cooperation in answering the following
questions. All collected information will be treated with strict confidentiality and
will be used for study purposes only.
Age
a) Below 25 b) 25-35 c) 35-45 d) 45 and above
Gender
o Male
o Female
Marital Status
o Single
o Married
Religion -----------------------
Occupation
a) Govt. employee b) Businessman c) Student d) Landlord e)
Other -----------
Education
o Matriculation
o Intermediate
o Bachelors
o Masters
o Others ----------------------
Monthly Income
o Below 20,000
o 20,000-30,000
o 30,000-40,000
o 40,000-80.000

o 80,000 and above

1. Your account type ◊ Personal ◊ Business
2. What do you know about credit card?
o I don’t know what is a credit card
o I know about credit card but not enough detail
o I have enough information about credit cards
o I have experience of having a credit card
3. To what extent, each of the following sources was helping, to let you
know about the credit cards.
Not at all To some extent Great extent

o Friends & Family 1 2 3
o News articles and Television programs 1 2 3
o Internet 1 2 3
o Bank staff 1 2 3
o Company/Bank advertisements 1 2 3
o Brochures/ Leaflets 1 2 3
4. What kind of goods you purchase through credit cards.

a. Routine purchases
b. Luxury purchases
Please express your degree of agreement with following statements.
(1 = Strongly disagree, 2 = Disagree, 3 = Indifferent, 4 = Agree, 5 = Strongly
agree)
Strongly Strongly
Disagree Indifferent Agree
disagree agree
5. Use of credit card may lead to

1 2 3 4 5
overspending.
6. Overspending is the fault of
consumers, not the credit card 1 2 3 4 5
companies.
7. It is the bank’s right to charge
interest on the loan they provide 1 2 3 4 5
to customers.
8. Use of credit card is against 1 2 3 4 5

Islamic values.
9. Credit card companies make it
1 2 3 4 5
hard for people to get out of debt.
10. Credit card is very likely to be lost
1 2 3 4 5
or stolen.
11. I feel comfortable to adopt new
1 2 3 4 5
technological products.
12. Consumers would be better off if
1 2 3 4 5
there were no credit cards.
13. Credit cards are very helpful for
1 2 3 4 5
online payments.
14. Credit cards can be used for
1 2 3 4 5
payments on different outlets.
15. Interest rates charged on credit
card balances comply with the 1 2 3 4 5
benefits it provides.
16. Credit card limits offered by
1 2 3 4 5
issuers are sufficient.
17. Banks clearly provide the
information about all types of
1 2 3 4 5
costs being charged on credit
cards.
18. I hardly pay my credit card
1 2 3 4 5
outstanding balance in full.
19. My merchant accepts credit card
when I make large size 1 2 3 4 5
transaction.
20. 4. There are sufficient numbers
of outlets accepting credit 1 2 3 4 5
cards in Pakistan.
21. My credit card has wide
1 2 3 4 5
acceptance abroad.
22. I am satisfied with the time period
within which I have to clear my 1 2 3 4 5
credit card outstanding balance.
23. The number of paying centers
available for clearing bill in my 1 2 3 4 5
hometown is sufficient.
24. Current security features provided
1 2 3 4 5
by card issuers are sufficient.

How much importance do you put on each of the following factors as a

barrier in your decision of adopting a credit card?
(1 = Not important at all, 2 = Not very important, 3 = Neutral, 4 = Some what

important, 5 = Very important)
a. High interest rates charged 1 2 3 4 5

b. Heavy additional charges 1 2 3 4 5
c. Insufficient credit limit 1 2 3 4 5
d. Complexity of information 1 2 3 4 5
e. Low International acceptability 1 2 3 4 5
f. Low Domestic acceptability 1 2 3 4 5
g. Long Application approval time 1 2 3 4 5
h. Short repayment period 1 2 3 4 5
i. Strict Legal requirements 1 2 3 4 5
j. Complexity of issuance procedure 1 2 3 4 5
k. High Security risk 1 2 3 4 5
l. Lack of information 1 2 3 4 5

QUESTIONNAIRE FOR NON-CARDHOLDERS
Age
b) Below 25 b) 25-35 c) 35-45 d) 45 and above
Gender
o Male
o Female
Marital Status
o Single
o Married
Religion -----------------------
Occupation
b) Govt. employee b) Businessman c) Student d) Landlord e)
Other -----------
Education
o Matriculation
o Intermediate
o Bachelors
o Masters
o Others ----------------------
Monthly Income
o Below 20,000
o 20,000-30,000
o 30,000-40,000
o 40,000-80.000
o 80,000 and above
5. Your account type ◊ Personal ◊ Business

6. What do you know about credit card?
o I don’t know what is a credit card

o I know about credit card but not enough detail
o I have enough information about credit cards
o I have experience of having a credit card
7. To what extent, each of the following sources was helping, to let you
know about the credit cards.
Not at all To some extent Great extent
o Friends & Family 1 2
3
o News articles and Television programs 1 2
3
o Internet 1 2 3
o Bank staff 1 2 3
o Company/Bank advertisements 1 2
3
o Brochures/ Leaflets 1 2
3
Please express your degree of agreement with following statements.

(1 = Strongly disagree, 2 = Disagree, 3 = Indifferent, 4 = Agree, 5 = Strongly
agree)
Strongly Strongly
Disagree Indifferent Agree
Disagree Agree
4. Use of credit card may lead to
1 2 3 4 5
overspending.
5. Overspending is the fault of
consumers, not the credit card 1 2 3 4 5
companies.
6. It is the bank’s right to charge
interest on the loan they provide to 1 2 3 4 5
customers.
7. Use of credit card is against Islamic
1 2 3 4 5
values.
8. Credit card companies make it hard
1 2 3 4 5
for people to get out of debt.
9. Credit card is very likely to be lost
1 2 3 4 5
or stolen.
10. I feel comfortable to adopt new
1 2 3 4 5
technological products.
11. Consumers would be better off if
1 2 3 4 5
there were no credit cards.
12. Credit cards are very helpful for

1 2 3 4 5
online payments.
13. Credit cards can be used for
1 2 3 4 5
payments on different outlets.
14. Interest rates charged on credit
card balances comply with the 1 2 3 4 5
benefits it provides.
15. Credit card limits offered by issuers
1 2 3 4 5
are sufficient.
16. Banks provide complete information
about all types of costs charged on 1 2 3 4 5
credit cards.
17. There are sufficient numbers of
outlets accepting credit cards in 1 2 3 4 5
Pakistan.
18. Application approval time is long,
that hinders me to adopt credit 1 2 3 4 5
card.
19. I am not using credit card because
1 2 3 4 5
it has low acceptance abroad.
20. I don’t use credit card because time
period for clearing outstanding 1 2 3 4 5
balance is very short.
How much importance do you put on each of the following factors as a barrier in
your decision of adopting a credit card?
(1 = Not important at all, 2 = Not very important, 3 = Neutral, 4 = Some what

important, 5 = Very important)
m. High interest rates charged 1 2 3 4 5

n. Heavy additional charges 1 2 3 4 5
o. Insufficient credit limit 1 2 3 4 5
p. Complexity of information 1 2 3 4 5
q. Low International acceptability 1 2 3 4 5
r. Low Domestic acceptability 1 2 3 4 5
s. Long Application approval time 1 2 3 4 5
t. Short repayment period 1 2 3 4 5
u. Strict Legal requirements 1 2 3 4 5
v. Complexity of issuance procedure 1 2 3 4 5

w. High Security risk 1 2 3 4 5
x. Lack of information 1 2 3 4 5

Perceived Barriers in The Adoption &amp; Usage of Credit Cards

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Perceived Barriers in the Adoption & Usage of Credit Cards

Perceived Barriers in the

Hasnain Akhtar 217

Department of Management Sciences 1

Dated: 12th April 2010

Department of Management Sciences 2

Department of Management Sciences 3

Abstract understanding of factors or variables

Research Limitations/Implications: - Paper Type: Research paper

Department of Management Sciences 4

Department of Management Sciences 5

and have success on the horizon of

A number of factors are identified based

Department of Management Sciences 7

Demographic strong determinant of credit spending

Department of Management Sciences 8

credit cards than the married ones (Gan, Awareness

Department of Management Sciences 9

Department of Management Sciences 10

Department of Management Sciences 11

• Long Application Approval Socio-Psycho

Chan (1997) found in Hong Kong that • Type of Users

Department of Management Sciences 12

one’s life style may be an important

Devlin, Worthington, and Gerrard (2007) PEOU is a degree to which people

Department of Management Sciences 13

Department of Management Sciences 14

resist people to adopt credit card as a

Department of Management Sciences 15

Department of Management Sciences 16

Department of Management Sciences 17

Department of Management Sciences 18

Population and Study Sample As this research was of comprehensive

Department of Management Sciences 19

Findings & Discussion

Customer Characteristics Frequency Percent

Department of Management Sciences 20

Department of Management Sciences 21

Department of Management Sciences 22

Table 2 presents some of the create as such barrier in adopting or

revealed that there is no considerable change or happy to adopt newly

Department of Management Sciences 25

Department of Management Sciences 28

Surprisingly, high security risk

Some of the respondents put

The bottom two listed reason that has

The last two mentioned reasons for low

Department of Management Sciences 31

research results we can conclude that such as short repayment period,

Department of Management Sciences 32

Department of Management Sciences 33

use new types of payment • It was found in the results that

Department of Management Sciences 34

card services to customers in broader mechanism. In future, a study can be

Department of Management Sciences 35

Davis, F. Perceived usefulness, perceived ease of use, and user acceptance of

Department of Management Sciences 36

Worthington, S. (2001). Affinity Credit Cards: A Critical Review. International Journal of

Department of Management Sciences 37

Department of Management Sciences 38

Questionnaire For Cardholders

Department of Management Sciences 39

o 80,000 and above

Perceived Barriers in The Adoption & Usage of Credit Cards

Perceived Barriers in The Adoption & Usage of Credit Cards